the income tax guide for self-employed (liberal) professionals -...

The Income Tax GuideFor Self-Employed (Liberal)Professionals(And taxpayers with fixed profits)

June 2003

Free Distribution

Republic of LebanonMinistry of FinanceInstitute of Finance

ArtisanAccountant

ArchitectBroker

CalligrapherCalligraphy Expert

Dental Laboratory OwnerDentist

Engineer: Civil, Electronic,

Industrial, Electrical, Information Technology,

Agricultural

Interior DesignerLaboratory Technician

Laboratory OwnerLawyer

Legal Consultant Maternity Center Owner

Medical Analysis Center Owner

MidwifeMusician

Medical DoctorNotary Public

PhysiotherapistPainter

PharmacistSworn Expert

Translation ExpertTopographer

Veterinarian etc...

The Income Tax Guide for Self-Employed (Liberal) Professionals - June 2003

Selected Legal Terms

The terms used in this guide shall mean the following:

1- The Contribuable or Taxpayer: Any self-employed (liberal) professionalwho is subject to tax under Title (I) (tax on profits) and who must declare andpay this tax to the Public Treasury. She/he shall also be responsible forwithholding taxes set under Title (II) (payroll tax, if applicable) and shall berequired to declare and settle these payroll taxes to the Public Treasury.

2- The Tax Administration: This is represented by the Directorate of Revenuesattached to the Directorate General of Finance at the Ministry of Finance.

3- The Concerned Unit: The Income Tax Department in Beirut or the headoffice of the Ministry of Finance in each Muhafaza outside the Muhafaza ofBeirut.

4- Notification: Notifying the Tax Administration of the initiation of businessand designation of the premises where the profession is conducted.

5- Work Year: The year in which the taxpayer’s income is generated. Thisextends from January 1 to December 31 of each year.

6- Tax Settlement Year: The year that follows the working year for which theincome declaration is submitted.

7- Direct Assessment: This method is applied when the taxpayer’s declarations,records, entries, supporting documents and other reports are not taken intoconsideration by the tax unit due to a basic violation (of the law). Theconcerned unit at the Ministry shall then estimate the taxpayer’s annual netprofits according to the applicable data, criteria and rules and based on its solediscretion, within the accepted controls and norms.

8- Lump- Sum Profit Method: Under this method, the net profit is assessed asa percentage of the taxpayer’s total income. This percentage is set by theMinister of Finance for all types of professions.

9- Real Profit Method: This is an accounting method used to assess net profitsaccording to the double entry accounting system.

Note: The self-employed (liberal) professional may apply to be taxed according to thereal profit method provided that the taxpayer submits the appropriate applicationto the concerned unit at the ministry before the end of January of each taxableyear. Those choosing to be taxed according to the real profit method may not applyfor taxation according to the lump-sum profit method in subsequent years.

37The Income Tax Guide for Self-Employed (Liberal) Professionals - June 2003

❖ The assessed profits should be approved by the Assessed Profits Committee ateach concerned fiscal unit. These committees are appointed by the Minister ofFinance based on the proposal of the Director General of Finance.

❖ The validity date of the verification and collection of fines shall commencefollowing the expiry date of the statutory deadline for the submittal of thedeclaration and settlement of the tax. The fraction of a month is considered afull month when calculating the amounts of these fines.

❖ Taxes, fines and amounts due to the government, as stipulated in the IncomeTax Act, shall have prior lien over all the taxpayer’s assets or the assets of anyperson liable for their settlement to the Treasury.

The team that prepared this guide:

The preparation and the technical and legal formulation of this guide were coordinated,by Mr. Emile Dirani, a former financial inspector and a present lecturer on ‘taxes andfees’ at the Faculty of Law at La Sagesse University. The Chief of the Income TaxBureau in Beirut, Mr. Sarkis Sakr, Chief tax controllers, Walid Nouyayhed, AssadMallah and Bassima Antonios, tax controllers, Elias Haddad, Iman Zogheib, CharbelShedrawi and Miss Zeina Misk from the Institute of Finance, have participated in thecollection, the verification and the formulation of all the information.

The guide was rewritten in a simplified language by Mrs. Lamia Moubayed, Directorof the Institute of Finance.

It was reviewed for comprehensiveness by Mr. Alain Bifani, Director General ofFinance and Dr. Habib Abu Sakr, former Director General of Finance, and Mr. IbrahimKhoury, Tax Consultant.

Special thanks to Amal Hawa, Farah Dabbous and Lubna Boustany.

This guide was translated from Arabic by SARI-Lebanon, Po.Box: 11-5665, Awad Bldg, 6th floor, Abdul Aziz Str., Hamra, Beirut Lebanon

Tel: 01-343740 and 01-344814 , Fax: 01-344814 and 01-319337Email: [email protected]

This guide was prepared with the appreciated support of the USAID via “TheTransparency and Accountability Program” (TAG) managed by AMIDEAST Lebanon.

Ideas and opinions expressed in this guide do not necessarily reflect the view of theUSAID or AMIDEAST Lebanon.

Useful Addresses

Beirut Directorate of Revenues - Income Tax DepartmentTaxpayers Services and Pay Office SectionBechara El Khoury St. - Fi’a’ni Bldg.Tel.: (01) 655830 - 50

Ministry of Finance Departments:Baabda: Offices of the Ministry of Finance inBaabdaTel.: (05) 920539

Tripoli: Offices of the Ministry of Finance in NorthLebanon - Al Tal Square - Abdul Hamid Karami St.Tel.: (06) 430083

Zahle: The Serai of ZahleTel.: (08) 801002

Saida: The Serai of SaidaTel.: (07) 722126

Nabatieh: Hassan Kamel al Sabbah St. DaherCenterTel.: (07) 761342

This guide can be obtained from:The Institute of Finance512 Corniche al NahrP.O. Box: 16-587Tel.: (01) 425148/9Fax.: (01) 426860Email: [email protected] - www.if.org.lb

The Income Tax Guide for Self-Employed (Liberal) Professionals - June 2003

Preface 2

1- To whom is this guide addressed? 4

2- Where should I begin? 6

3- What are the legal records? 9

4- Which incomes are subject to income tax? 12

5- How is the tax assessed? 14

6- How should I declare my activities annually? 18

7- How and where should I pay my income tax? 20

8- How should I declare the salaries and wages of my employees? 22

9- How does the Tax Administration verify the declarations? 27

10- How can the taxpayer object to additional and supplementary tax imposition? 30

11- Reminder of the most important statutory deadlines 33

Index

Annex #1 34

Cases of self-employed (liberal) professionals: I have ceased working due totravel, illness or other reasons, or I have closed my work premises ortransferred their ownership: What should I do?

Annex #2 36

Main violations and fines that a taxpayer may have to pay and ways to avoidthem.

Useful Addresses

2 The Income Tax Guide for Self-Employed (Liberal) Professionals - June 2003

Preface

Surveys have shown that a great number of self-employed (liberal)professionals are not registered with the Tax Administration and fail to submittheir tax declarations as required under existing laws and regulations. Inaddition, many declarations submitted by self- employed professionals containa considerable number of errors. The most important reasons for non-observance of the tax laws by self-employed (liberal) professionals is thatmany of them have insufficient knowledge of the income tax system and itsprocedures, including ignorance of what incomes are taxable, exemptions,abatements, methods of assessing applicable tax, in addition to other essentialinformation. Consequently, a taxpayer who ignores the basic information orpossesses erroneous information on tax impositions or avoids resorting to theIncome Tax Department to obtain the required information, will be liable tofines that could have been avoided had she/he been aware of this information.

In its endeavor to build a closer, clear and transparent relationshipbetween the government and citizens, the Ministry of Finance has preparedthis simplified user-friendly guide that aims to:

❖ Explain the relationship between the citizen and the Tax Administrationinvolved in implementing the Income Tax Act described in this guide.

❖ Familiarize citizens with the simplified ways and means of completing theirincome tax declarations, particularly if they choose to complete them bythemselves.

❖ Clarify any consultations with the Tax Administration that may be requiredand simplify procedures to save time and avoid fines or penalties.

This guide is addressed to every self-employed (liberal) professionalwhether affiliated to a syndicate/order or not. It is also addressed to thosepreparing to start practicing a profession, with the aim of guiding them withregard to their rights and obligations. The procedure starts with informing theTax Administration directly upon commencement of work and seekingguidance concerning the methods of proper book-keeping, income taxassessments and declarations, statutory deadlines and procedures for taxsettlement, fines imposed for delays or non-settlement and other violations thatcan be avoided. In addition, this guide offers information concerningprocedures for objecting to taxes and other related matters.

The clarification of procedures for dealing with the Income TaxAdministration will encourage taxpayers to submit their declarations directlywithout resorting to third parties, if they so wish. The Tax Administration willalso help them comply with the law, complete their transactions quickly, moreefficiently and at lower costs. This is one of the objectives of the Ministry ofFinance concurrent to its efforts to enhance transparency at its variousdepartments whereby people will come to know their rights and obligations,thus saving time, avoiding errors, problems and unnecessary fines.

The Ministry of Finance has pledged to review its guides regularly.This pledge shall be fulfilled, as necessary, in order to develop this guide andour other publications whenever fundamental legal amendments areintroduced or new implementation procedures adopted.

Fuad SinioraMinister of Finance



1. To whom is this guide addressed?

❖ Any person residing in Lebanon,

❖ Lebanese or non-Lebanese,

❖ Practicing a free profession onLebanese territory,

❖ That generates a taxable income,

❖ Which shall be imposed on thetotal income earned by the selfemployed (liberal) individual inLebanon.

Who is a self-employed (liberal)professional

What is a free profession?

Every profession that generates forits practitioner a non-commercial,non-industrial income or handicraftincome.

To every self-employed (liberal) professional

What does the word “taxpayer” mean?The contribuable or taxpayer, in the context of this guide, is the person whopractices a profession that generates a taxable income.The taxpayer : the person required to declare and pay a tax.

When will a self-employed (liberal) professional become a“contribuable” or “taxpayer”?❖ When affiliated to a syndicate/order, in case this is mandatory (lawyers,

engineers,doctors, etc).❖ Or upon the start of any actual work, i.e.upon commencement of practicing

a profession.

What are the duties of the self-employed (liberal) professional?❖ To inform the Tax Department of her/his activities as soon as the

professional commences practicing these activities.❖ To keep proper records.

❖ To conduct self-assessment or auto -declaration of taxes due and settle them.

❖ To submit a tax declaration to the Income Tax Department within thestatutory deadlines.

❖ To inform the Tax Department of any modifications on the professional taxstatus.

The information given in this guide is derived from:

❖ The provisions of the Income Tax Act issued by Decree No. 144,dated June 12,1959 and its amendments.

❖ The provisions of the Direct Tax Collection Act issued by DecreeNo. 147, dated June 12, 1959 and its amendments.

❖ Related circulars, decisions, memoranda and instructions issuedby the Ministry of Finance.

The principle on which this guide is based:

The chronological principle was adopted in the preparation of this guide:

❖ The date starts when the taxpayer obtains a license to practice thestated profession or commence work.

❖ This is followed by preparing the proper accounting books, theirofficial endorsement, methods of keeping them, annual taxdeclarations, verification by the Tax Administration, imposition of additional or supplementary taxes and determination of the of taxsettlement methods.

❖ The procedure then covers the closure or transfer of ownership ofthe work location or office.

❖ Finally, this guide clarifies the taxpayer’s right to object to theamount of the taxes imposed.

Useful Information:The following pages contain a number of legal and accounting terminologythat may be difficult for some readers to understand fully. In this case, thecitizen is requested to contact the Ministry of Finance by phone, mail or e-mailor proceed to the Taxpayers’ Service Unit attached to the Income TaxDepartment in Beirut or the Cashiers Offices (Muhtasibiya) in the variousMuhafazat for the necessary guidance (refer to back cover).


Lebanese law requires from every professional intending to start practicing forthe first time to make a declaration to the Income Tax Department in Beirut orto the concerned unit in the Muhafazat, depending on the place of practice.Otherwise, she/he may risk being considered “undisclosed” and thus liable tolegal fines.

When should the notification be submitted?Within two monthsfrom the date of affiliation to a syndicate/order, forprofessionals required to be affiliated to a syndicate/order, or within twomonths from the commencement of work (for those not required to beaffiliated to a syndicate/order).

When does the two-month period start?The period starts from either:

❖ The date of affiliation or issue of a license, for those required to beaffiliated to a syndicate, or

❖ The date of the first job generating a taxable income, or

❖ The date of issue of any document which demonstrates the generation ofincome from a profession, or

❖ The date of rental, use or purchase of the work location, or

❖ The date of engaging any employee at the work location, or

❖ The date of subscription to Electicité du Liban, the Water Authority or theTelephone service.

In case several of the above criteria are present, the criterion carry if the oldestdate shall be apply.

Where should the notification be submitted?It should be submitted to the Income Tax Department in Beirut or to theconcerned unit in the Muhafaza where the profession is practiced.


2. Where should I begin?

Required Documents

❖ Copy of the license (if the self-employed (liberal) professional such as anengineer, doctor, lawyer and other professional, is required to obtain alicense).

❖ Copy of the syndicate/order registration card.

❖ Copy of the family register record (for married couples) or an individualregister record (for single individuals).

❖ Copy of the rental contract or property deed of the offices where theprofession is practiced.


How?The special declaration forms, provided free of charge by the Income TaxDepartment, should be used to declare commencement of work.

Important Remarks

❖ Obtain and keep the receipt or serial number and date of the registration,or the computerized registration certificate.

❖ Do not hesitate to ask for help from the Taxpayers’ Service Unit (Refer tothe back cover).

❖ Form (M11): PersonalIdentification

❖ Form (M10):Commencement of Work

How much will the transaction cost?

Nothing; the declaration is exempt from fiscal duty(1).

What happens if the tax payer fails to submit the notification?The taxpayer shall be considered “undisclosed” and liable to a fine ofL.L.500, 000.00for failing to declare the commencement of work within thestatutory two month period, in addition to any other applicable fines (refer tothe explanations included later in the guide).

(1) Declarations, objections, statements and other related documents submitted to the Ministry of Financeconcerning income tax are exempt from the fiscal stamp duty (Article 113 of the Income Tax Act).


Jihad, a doctor registered in the medical doctors’ order on25/11/2002 has not yet started practicing his profession. He doesn’town or operate a clinic. He is preparing himself to travel abroad tocontinue his specialization. In order to avoid paying any taxes, heapproached the taxpayer’s Service Unit, which:

❖ Helped him to complete the forms for notification and commencementof work (Forms M10 and M11). Jihad was not required to pay any tax orfine since he completed the notification process prior to 26/1/2003, i.e.,within the two-month deadline.

❖ Reminded him of his obligation todeclare his non-practice for theyear 2002 (Form M7) before thefirst of February 2003accompanied by a copy of hispassport; otherwise he will beliable to a fine of L.L.100,000.00.

❖ He was also reminded to submitthe same declaration (non-practiceof a profession) by hand orregistered mail, within the annualdeclaration deadline, i.e. beforethe 1st of February of each year, toavoid payment of a fine, and untilhis return to Lebanon and hisactual commencement of practice.In addition, Dr. Jihad has to keep proper records and submit an annualpersonal declaration form covering his activities each year.

What should a taxpayer do in case she/he does not wish to startpracticing due to travel, pursuit of higher studies, etc.?

Practical example (1): Declaration of non-practice


3- What are the proper records?

Practical Example (2)

Nada is an accountant who submitted her commencement of workdeclaration to the Finance Administration in Nabatieh but she hasn’tstarted working yet. Nada is, therefore, exempt from the obligation tokeep the above two records until she commences work.

Salim is an interior decorator who uses computer paper rather thanregular records to record his accounts. This procedure becomes legalonce these papers are authenticated (numbered, stamped and signed)by a Notary Public.

The self-employed (liberal) professional is required by law to keep twoaccounting books:

Income/ Expenditure Journal Fixed Assets Register

Receipts and paymentsare recorded daily on achronological basis.

Used to account for furniture,equipment, goodwill, etc. Thevalue of these assets is recorded atcost price.

Why should these records be kept?

❖ To determinate the annual income.

❖ To determinate all profession-related costs incurred by the taxpayer.

❖ To facilitate the verification process of the Tax Administration.

Keeping proper records is necessary. It is a mandatory process to ensure thatthe taxpayer records all sources of income and expenses according to statutoryprocedures, without the possibility of changing these records or manipulatingentries to prevent tax evasion.


Where can I obtain these records from?From designated bookstores.

How do these records become legal?These records become legal when a Notary Public, located in the same area asthe taxpayer’s work location, numbers and stamps every page of both theseaccounting books and marks each one - by signing and dating her/hisendorsements - prior to the date of making the first entry (the first recordedaccounting operation) in either of these two books.

How can I organize my accounting records in a proper andsystematic way?Entries should be recorded clearlyand the accounting method adopted shouldallow easy verification of the authenticity of the recorded entries (known asaccountancy entries) and avoid any ambiguity.

❖ Daily operations must be recorded in the daily journal chronologically.

❖ Each recorded operation (entry) must be supported by a document (invoiceor receipt) that confirms the origin and the content of the entry.

❖ Records and documents that prove the authenticity of entries anddeclarations should be kept in file for a period of five years from the date ofthe said tax year (for example, records and documents relevant to the 2000tax year should not be destroyed before the end of 2006).

Practical Example (3): Patients’ privacy

Zeina is a doctor who wishes to maintain her patients’ privacy. Sheaddressed an inquiry to the Taxpayers Service Unit which advisedher that it would be sufficient for her to record the details of theamounts she receives for her medical services, and the date of such

receipts, without mentioning the patient’s name or nature of illness(provided that all necessary documents are available to confirm the receiptof funds).


In the above two cases, the records shall be considered in vibration of theapplicable regulations and the taxpayer shall be fined 10%of the value ofthe tax due provided that this is not less than L.L.100,000.00.

(2) Refer to Annex # 2 on page 36.

In the above two cases, the taxpayer shall be liable to the cancellation of hisaccounting records and the administration will then assess his profitsdirectly(2) and the taxpayer shall be fined an amount equal to the tax due,provided this is not less than L.L.100,000.00.

What happens if I fail to keep records according to the regulations?1- In case endorsement date is subsequent to the date of the first entry in the

books.2- Or in case one or both books are not endorsed by a Notary Public.

Helpful Tips

❖ Accounting entries should be recorded in ink.

❖ Scratching, filling, erasing, overwriting (writing over the same entry)and using Typexis prohibited.

Errors may be corrected provided that: ❖ Corrections are made in a visible manner, and written in both numbers

and letters, using ink of a color different from that used in the originalentry.

❖ The date of making the correction and the signature of the person whomade the correction should be shown below the corrected entryaccording to the same procedure followed in correcting officialdocuments or bank checks.

3- In case the books are incomplete according to the regulations, i.e. therecords do not contain full details of all entries.

4- Or in case where the accounting books are not available (either one of thebooks or both).


4. Which incomes are subject to income tax?

Incomes subject to income tax include:

❖ Annual profits of a self-employed (liberal) professional generated frompracticing a profession;

❖ Incomes from contracts concluded;

❖ Salaries and wages received;

❖ Salaries and wages paid to persons employed by the taxpayer;

❖ Payments made to non-residents, i.e individuals who do not have a work placein Lebanon, whether Lebanese or foreign;

❖ Improvement profits derived from sale the of fixed assets (equipment,property, goodwill or other tangible and intangible assets owned by thetaxpayer).

In case the taxpayer owns shares in a company or has other revenues, the taxableincome shall include: ❖ Her/his share of profits generated from commercial, industrial or non-

commercial activities in the same way as if the taxpayer were a partner in thecompany.

❖ Her/his income from sole propriertships or commercial, industrial and non-commercial activities she/he is engaged in.

Are there any additional fees? Fixed Fee: This is an annual fee applied to all work locations amountingL.L. 250,000.00irrespective of the financial results (profit or loss) of thetaxpayer’s activities.

Fixed Fee

❖ This fee must be settled before the 30th of September of each year.

❖ In case of delay in settlement, the amount of the fee shall be doubledfor each year of delay. A fraction of a year is considered as one full year.

❖ The fee should be paid starting from the first year of the establishmentof the business.

❖ Collection of the fee ends as of the beginning of the year during whichthe taxpayer informs the Concerned Unit of the termination of work.


Test your tax Information

Q: Ziad is an interior decorator who owns a consulting firm inBeirut and a branch in Tripoli. He provides consultation servicesto a number of architectural firms in return for specified fees. Heis also a sales agent for office lamps which he sells from time totime. How should he declare his revenues?

A: If the taxpayer owns more than one business location or works in severalplaces simultaneously, or is engaged in trading occasionally, he mustinclude all his revenues in one single declaration submitted to the relevantCashier office (Muhtasibiya) in the district of his principal work location,such as Beirut in this example. Ziad’s declaration should include hisrevenues from his activities in both the Beirut and Tripoli offices as wellas his revenues from electric lamp sales. Ziad is also required to pay afixed annual fee amounting to L.L. 250,000.00 for each office. In thiscase, Ziad should pay a fixed fee of L.L. 500,000.00 before the 30th ofSeptember each year.


5. How is the tax assessed?

Doctors and Medical ServicesApplicable rate

Doctors owning scanners 20%Midwives 40%Doctors treating with physiotherapyand electricity 40%Veterinary Services 40%

In order to clarify the tax assessment process, the meanings of the followingthree terms must be fully understood:

1. Annual Income 2. Lump-sum Income

The total annual revenues asrecorded in the revenue/ expenditurejournal.

A specified percentage applied toannual revenues to determine thetaxable profits derived from thetaxpayer’s profession (see below).

3. Net Profit

An amount calculated according to the following equation:Total annual income x the rate of lump sum profit/100

This method for extracting the net profit is called “The lump sum profitmethod”, in contrast to the real profit method which adopts a more complexaccounting method (double-entry accountancy).

The lump-sum taxable profit of some professions(3)

Lawyers and legal services Applicable rateLawyer 50%Notary Public 45%Legal Consultant 50%

Professionals and engineeri ng servicesApplicable rate

Civil Engineers 35%Architects 35%Electronic Engineers 35%Industrial Engineers 35%Mechanical Engineers 35%

Professionals and Engineering ServicesApplicable rate

Electrical Engineers 35%Interior Designers 35%Topographic Engineers 40% Agricultural Engineers 30%

Doctors and Medical ServicesApplicable rate

General Practitioners 50%Specialist Doctors 50%

Surgeons * 65% (or 50%)Dental Surgeons/Dentists 35%

(3)Refer to Minister of Finance decision number 4169 dated 16/8/1992 and its amendments.

v If the taxpayer owns a clinic outside a hospital.


An amount determined annuallybased on the taxpayer’s maritalstatus.

Who determinates the taxable profit rate?Taxable rate are determined by a committee formed of the Director General ofFinance, as its president, and four members: a representative from the Ministryof the Economy and Trade, a representative from the Chamber of Commerceand Industry, an expert representing merchants, industrialists or self-employed(liberal) professionals, and an official from the Ministry of Finance. Rates arepublished by a decision issued by the Minister of Finance.

Practical Example (4): Assessment of Net Profit

Fadi is a practicing lawyer. His income in 2002, i.e., between 1/1/2002and 31/12/2002, amounted to L.L.100 million. This amount wasderived mainly from legal consultation fees and other fees received forlegal services. The taxable net profit rate for the legal profession is

50% of income, in other words 50% of his income is considered as netprofit while the other 50% is considered as professional expenses.Therefore, the net profit made by Fadi is L.L.100,000,000.00 x 50%= L.L. 50 million.

Is tax applied to net profit directly? NO!!!Before beginning any tax assessment, an amount known as “familyabatements” is deducted from the net profit.

Family abatement? Its Objective?

To reduce the tax burden onfamilies, in particular those withlimited incomes.


Test your tax Information

Q: Nadim and Nada are engineers with two children working for acompany. What is the amount of the family abatement that they areentitled to?

A: Nadim shall be entitled to a family abatement amounting to L.L.7,500,000.00 plusan additional abatement for the children amounting to L.L. 500,000.00 for eachchild, i.e. a total amount of L.L. 8,500,000.00 Nada will also be entitled to anabatement of L.L. 7,500,000.00 upon the assessment of her taxes.

How can taxpayers determine the amount of family abatements?

Marital Status of the Taxpayer Amount of Abatement

Single individual

Married male whose wife works, with no children LL7,500,000.00

Married female without children and whose husband works

Add to the above abatement the following amounts:

For the wife, in case she is not working LL 2,500,000.00 For every legitimate child still under the taxpayer’s care(4), provided that the total number of children does not exceed five LL 500,000.00

General Remarks

❖ In case the father is deceased or suffers from a disabling disease (holding a“disability card” issued by the Ministry of Social Affairs) and is unable to performany paid work, the mother can claim the additional abatement for the children.

❖ If both husband and wife work and have children under their care, the father shallbe given the family abatement for the children plus the abatement he is entitled topersonally.

❖ The taxpayer’s marital status as at the first month of the assessment year shallbe applied.

(4) Children under a taxpayer’s care are:-Males: under 18 years of age or until a maximum age of 25 provided they are pursuing a universityeducation.-Females: until their marriage, or if widowed or divorced.-Disabled: Throughout the validity period of their disability card.


Progressive Brackets of net taxable profit Tax on Total amount ofTax Rate each bracket tax brackets

From LL to LL LL LL

4% 1 9,000,000.00 360,000.00 360,000.00

7% 9,000,001.00 24,000,000.00 1,050,000.00 1,410.000

12% 24,000,001.00 54,000,000.00 3,600,000.00 5,010,000.00

16% 54,000,001.00 104,000,000.00 8,000,000.00 13,010,000.00

21% Over 104,000,000.00

How can the taxpayers assess their taxes?After benefiting from the above family abatements, the taxpayer can assess thenet taxable profit which equals the net profit, less family abatements.

The taxpayer can then work out the assessment of the tax according to thefollowing progressive schedule:

Practical example (5): Tax assessment

Rami is a legal consultant, married to Rana (housewife) with nochildren. His annual income is LL 100 million. How can heassess his income tax? ❖ Rate of taxable profit applied to legal consultants = 50%

❖ Net profit = 100 million LL. (annual income) x 50% (lump-sum profit)= L.L. 50 million.

❖ Family abatement for a married taxpayer without children = 10,000,000.00(his spouse doesn’t work)

The taxable net profit will be: L.L. 40,000,000.00

Bracket Annual Tax Rate Tax AmountTax Assessment 9,000,000.00 x 4% = 360,000.00

+ 15,000,000.00 x 7% = 1,050,000.00+ 16,000,000.00 x 12% = 1,920,000.00

Total 40,000,000.00 3,330,000.00

Therefore, the tax burden borne by Rami as a percentage of his annual income is = 3.33%

❖ For tax assessment purposes, profits of less than L.L 1,000.00 are neglectedand the total tax is rounded up to the nearest thousand to the benefit of theTreasury.

❖ A fixed amount of L.L. 10,000.00 and a fiscal stamp of L.L 1,000.00should be added to the tax.

When should I make the declaration? And where?Before the 1st of February of each year, a self-employed (liberal) professionalmust:

❖ Submit the tax declaration and its annexes by hand, against a receipt, to the concerned department (see back cover), or

❖ Complete the tax declaration and its annexes and send them by registered mail, against a receipt.

Special cases: In case a self-employed (liberal) professional owns a share in acompany, or in case she/he owns an establishment that is assessed according tothe real profit method, the taxpayer should declare all incomes from her/hisprofession according to the real profit method, before the 1st of April of each year.

How should I prepare the annual declaration of my profits?

The annual declaration of personal income shall be prepared by filling up threeforms: Forms F1, F3 and S1.

Form (F1):This is a personal declaration of income tax. In addition to personal data, itincludes:❖ Detailed information concerning people for

which the taxpayer is responsible in orderto assess the family abatements;

❖ Income generated from self-employmentfor the relevant fiscal year, includingincome from other establishments. Theseamounts shall be taken from the income/expenditure journal;

❖ Income from the ownership of othercommercial or industrial firms, whichshould be assessed according to the lump-sum profit method ;

❖ Salaries and wages received during thefiscal year;

❖ Amounts paid to non-residents (if applicable), i.e. to individuals,establishments or firms that do not have a registered business location inLebanon, whether Lebanese or non-Lebanese (check last page of Form F1).

❖ Improvement profits, if applicable, i.e. profits resulting from sale of fixedassets at a price higher than their original cost after depreciation (in such acase the difference is taxable at the rate of 10%).


6. How should I declare my business activities every year?


Form (F3):This is a statement of revenues andexpenditures which should include,in addition to personal data, thefollowing:

❖ The total revenues generatedfrom each activity;

❖ Details of charges and expenses.These amounts should be takenfrom the revenue/ expenditurejournal only expenses relevantto practicing the professionshould be included. The total ofeach category of expendituresshould be given supported bythe necessary documents;

❖ The total purchases of fixedassets: As entered in the specialregister with their cost;

❖ Total amounts paid to non-residents.

Form (S1):This is an income tax pre-paymentnotification, made out in fourcopies that includes:

❖ Amounts and types ofapplicable taxes.

❖ Fines, if applicable.

Important remarks

❖ The taxpayer shall declare the total of all her/his revenues and no incomeshall be exempt unless expressly stipulated by law.

❖ This declaration should be submitted even if it does not include anytaxable income.


7. How and where Should I pay my income tax?

Is it possible to pay by installments? Yes!!!

❖ The application for payment by installments shall be submitted to theBeirut Collections Department or to the concerned AccountingDepartment. Applications are presented, through the hierarchy of theministry, to the Director General of Finance.

❖ The application for payment in installments should be approved by theDirector General of Finance.

❖ The full amount of the installments shall become due for payment:- In case the taxpayer fails to pay any installment on its specified date;- In case of either forced or voluntary sale of the taxpayer’s assets;- In case of the taxpayer’s bankruptcy or the liquidation of her/his assetsby court order.

Payment shall be made in one single installment, in cash or by a certifiedcheque drawn in the name of “The Treasurer of the Central Treasury”,accompanied by the S1 form relevant to tax pre-payment.

Keep the receipt, and then:

Hand over the declarations (i.e. Forms F1, F3 and S1) with the paymentreceipt to:❖ The concerned unit by hand against a receipt

❖ Or send them by registered mail against a receipt

Taxes should be paid before submitting the declaration, i.e. prior toFebruary 1st of the tax year.

At the Collections Department inBeirut or at the Cashiers Offices(Muhtasibiya in the qazas)according to one’s work location

At commercial banks and alltheir branchesor


What happens in case of a delay of the pre-payment?

❖ The taxpayer shall be liable to a fine of 2% of the tax for every month ofdelay. A fraction of a month is considered as one full month.

❖ The fine becomes applicable starting from the expiry date of the declaration,i.e. of February 1st of each year.

What happens in case of delay in submitting the declaration?

❖ The taxpayer shall be liable to a fine of 10%of the tax for every month ofdelay. A fraction of a month shall be considered as one full month. Theamount of the fine shall not be less than LL. 100,000.00.

❖ In case the delay period exceeds 12 months, the Income Tax Administrationshall make a direct assessment of the taxpayer’s profits(5).

What happens if I fail to submit the declaration?This shall be considered as a case of tax evasion. The self-employed (liberal)professional shall be assessed directly(5) and she/he shall be liable to a fineamounting to 100% of the tax, provided that the amount of the fine is not lessthan LL. 100,000.00.

Important remark

❖ Settlement of the tax does not prevent the Tax Administration fromverifying the taxpayer’s declaration (refer to page 27).

(5) Refer to Annex # 2 on page 36.

When should an employer declare the salaries and wages paid?

The employer should submit the declaration of the annual salaries paid to his/heremployees and workers in the previous year, irrespective of their amount, beforethe 1st of February of each year. In case of failure, the taxpayer shall be liable toa fine of 10% of the tax amount for every month of delay. A fraction of a monthshall be considered as one full month provided that the fine is not less than L.L.100,000.00.For this purpose the employer shall use Form R5 (the annual declaration of thepayroll tax), Form S1(the notification of pre-payment) and Form R6 (the annualstatement of total incomes of theemployees/wage-earners).

What does the annualdeclaration R5 and theperiodic statement R10include?In addition to personal data, FormR5 includes: ❖ Total amounts paid by the

employer annually to allemployees, such as salaries andwages, gratuities and fringebenefits for clothes, food, etc.;


8. How should I declare the tax on the salaries andwages of my employees?

In addition to the declaration of her/his business, the taxpayer should: 1- Deduct the applicable payroll tax from the salaries and wages of all employees;2- Pay the amounts deducted to the Central Treasury on a quarterly basis;3- Submit an “annual” declaration of the salaries and wages paid to employees (and

the payroll tax deducted)This payroll tax shall be imposed under the name of the self-employed (liberal)professional based on her/his declaration.

Settlement of the payroll tax

❖ The employer shall deduct the tax on salaries and wages and pay it to the Central

Treasury every quarter (3 months) prior to the 15th

of the month following the relevantthree-month period;

❖ The employer shall be liable a fine of 3% for every month of delay. The fraction of amonth shall be considered as one full month.

❖ For this purpose Form R10, the periodic statement of payroll tax settlement, andForm S1, the notification of pre-payment shall be used.


Allowance limits for certain compensations according to the State EmployeesCooperative regulations

Birth 50% of the basic salaryMarriage 200% of the basic salaryDeath 200 % of the basic salaryEducation Determined by a decision of the State Employees

Cooperative

❖ Family abatements from which the employees benefit annually;

❖ The total amounts paid as annual lump sum wages;

❖ The annual tax due on total taxable payrolls, the payment periods(quarterly), the actual amount of tax paid and any remaining amounts due forsettlement.

The periodic statement R10 includes information concerning the salaries paidquarterly and the tax deducted by the employer.

How is the tax assessed on salaries and wages?

❖ The tax on salaries and wages, or payroll tax, is assessed on the basis of thenet total annual income received by the employee or wage-earner during theyear preceding the assessment year, after deduction of the family abatementsfor each employee (Refer to page 16).

❖ Net annual revenues means the total amount paid to the employee or wage-earner during one working year after deduction of the total allowances paidfor expenses required by the job.

What are these allowances?

❖ Family allowances paid according to the laws and regulations in force;

❖ Travel and transport allowances and monthly transport allowances;

❖ Allowances paid to the employee in compensation for additional dutiesperformed outside the regular work place;

❖ Representation allowance (10% of the salary);

❖ Allowances for clothing required by the employer, provided that suchcompensation does not exceed the minimum wage. (Allowances for foodcoupons amounting to LL. 5,000.00 for each employee for each day ofactual work;

❖ Education, marriage, death and birth compensations as stipulated in thecomprehensive employees regulations approved by the Ministry of Labor,and within the provisions and limits adopted by the State EmployeesCooperative;

❖ In general, all allowances paid for performing work required by the job.


Tax Assessment bracket Tax Rate Tax Amount

6,000,000.00 2 % 120,000.00

9,000,000.00 4 % 360,000.00

15,000,000.00 7 % 1,050,000.00

Total 30,000,000.00 1,530,000.00

Payroll Tax Assessment Procedure

The tax is assessed on the basis of net taxable salaries and wages according tothe following brackets and rates:

Tax rate Salary bracket Tax on each Total Tax on allLL bracket LL brackets LL

2%From 1 to 6,00,000.00 120,000.00 120,000.00

4% 6,000,001.00 to 15,000,000.00 360,000.00 480,000.00

7% 15,000,001.00 to 30,000,000.00 1,050,000.00 1,530,000.00

11% 30,000,001.00 to 60,000,000.00 3,300,000.00 4,830,000.00

15% 60,000,001.00 to 120,000,000.00 9,000,000.00 13,830,000.00

20% Exceeding 120,000,000.00

For assessment of the payroll tax, all fractions of the wage less than LL. 1,000.00 areneglected. The amount of the tax is rounded up to the nearest thousand in favor of theTreasury.

Practical Example (6): Assessment of payroll tax

How do we assess the tax on an annual salary of LL. 40,000,000.00 for a marriedemployee with no children, whose spouse is not employed (housewife)?The family abatements amount to LL. 10,000,000.00. Thus the net taxable incomeis LL. 30,000,000.00 divided into three brackets as shown in the following table:


Test your tax information

Q: Lubna, an employee at the clinic of Dr. Tarek, receives amonthly salary of LL. 600,000.00. What is the amount of thetax that Dr. Tarek should pay on her salaries and wages?

A: Lubna receives an annual salary of LL. 7,200,000.00 (600,000.00 x 12months), i.e. less than the amount of family abatement that she is entitledto, LL. 7,500,000.00. Consequently Dr. Tarek does not have to deductany tax from her salary but he has to submit the annual declaration (R5)covering Lubna’s salaries.

Q: If Lubna receives a monthly salary of one million LL and she startedworking at Dr. Tarek’s clinic on 1/5/2002, then what is the amount offamily abatement Lubna will benefit from for the year 2002?

A: Since Lubna started working on 1/5/2002, i.e. she worked at Dr. Tarek’sclinic for eight months during 2002, consequently the amount of familyabatement shall be assessed in proportion to the actual period of herwork:

(8 x 7,500,000.00) /12 = LL. 5,000,000.00

Notes concerning family abatements❖ Family abatements on salaries and wages are assessed in proportion to the actual

work period, i.e. from the date the employee starts working up to the end of theyear, or until the employee leaves work, in case this occurs before year-end.

❖ In case the employee’s status changes during the course of the year (marriage,divorce, birth, death, etc.), the family abatement shall be assessed from the date ofthis change. Payroll tax shall apply to employees and wage-earners whose totalannual wages exceed the family abatement amounts. The self-employedliberalindividual, assessed according to the lump sum profit method, should declarethe salaries and wages of his/her employees and wage earners, irrespective of theiramounts or the abatement amounts.

❖ The family abatement for a daily worker is LL. 25,000.00 daily, irrespective ofmarital status.

❖ Payroll tax is assessed without family abatement for employees who at the sametime perform other work subject to a tax on profits, i.e. the employee shall benefitfrom one family abatement only (Tax on profit).

❖ The tax on lump sum wages is assessed at the rate of 3% irrespective of theiramounts and without any abatements. Lump sum wages are wages paidoccasionally to anyone performing temporary work on the basis of the quantityproduced.

❖ Fractions of one thousand LL. are rounded up to the nearest thousand LL. to thebenefit of the Treasury.


Tax on Salaries and Wages Guidelines

❖ The employer should keep a special register of her/his employees andwage earners in which are recorded their names, salaries and wages,nature of their work, date of starting/termination of work. This register isnot subject to any official endorsement or page numbering by any partywhatsoever.

❖ The employer should make a declaration for any employees who alsoholds another job. In this case, the tax should be deducted from theemployee’s salary without family abatements. The employee who worksat more than one job should file, in person, a personal declarationincluding all her/his revenues before the 1st of June of each year, in whichthe employee indicates the names of any past employers, their addressesas well as the wages received from each.

❖ The declaration of salaries and wages should correspond to thedeclaration submitted to the National Social Security Fund in respect ofthe names of employees, their total salaries, wages and compensations.Otherwise, a fine ranging from LL 200,000.00 and LL. 500,000.00 maybe imposed.

❖ A nurse working at a doctor’s clinic, in contrast to a nurse working at ahospital, is not exempt from paying a payroll tax.

❖ A doctor employed by the Ministry of Health, for example, who alsoworks at his clinic, should submit to the concerned fiscal unit located inthe area of his clinic, a personal declaration including all his receipts (i.e.from his employment, from his clinic or from other sources, ifapplicable), before the 1st of February each year.

❖ All communications between the concerned fiscal unit and employeesliable to payroll tax shall be effected through the employer and notdirectly.

For more information, please contact:The Salaries and Wages Tax UnitJustice Palace Area, Corniche Al Nahr� 20664290, Beirut-Lebanon� 01/398234

E-mail: [email protected]: www.finance.gov.lb


9. How does the Tax Administration verify the declarations?

The Verification ProcessThe Tax Administration is entitled to verify any taxpayer’s personaldeclaration or payroll declaration and related supporting documents.The concerned unit shall verify that:

❖ The annual declaration and payroll declaration are accurate;

❖ Appropriate records are available;

❖ The book-keeping method is proper;

❖ Supporting documents are available;

❖ Any other matter required by law.

The Administration may exercise this right during the year in which thedeclaration is submitted or at any other time during the three following years.This means that if the taxpayer submits a declaration in 2001 for the fiscal year2000, the Administration is entitled to verify this declaration during 2001 orduring the three following years 2002, 2003, or 2004. Otherwise, theAdministration shall lose the right of verification due to the passage of time(passage of four years), unless otherwise specified.

Additional and Supplementary Costs?

Following the Tax Administration’s verification of the taxpayer’s business,personal declaration of incomes and expenditures, payroll declaration andother supporting documents, two cases may arise as a result of this process:

Case (1):In case it is demonstrated to the Tax Administration that all declarations arecorrect and submitted within the statutory deadlines and accompanied by thenecessary supporting documents, the controller will then put the file on recordand inform the taxpayer that the declaration has been accepted.


Case (2):

In case the controller finds what may necessitate amendment of thedeclaration, two possible scenarios may result:1) If the taxpayer’s declaration is incomplete (with regard to the amount of tax

payable) for any type of tax (profit tax, payroll tax or improvement tax), thecontroller shall charge the taxpayer, through a supplementary impositionorder, to settle the difference and impose a fine, if applicable.

2) But if the taxpayer fails to declare any particular type of tax (profit tax,payroll tax or improvement tax), the controller shall charge the taxpayer,through an additional imposition order, with the said tax and any applicablefine.

In Both Cases:

❖ The Administration will notify the taxpayer of the amount of taxamendment imposed with its justification, accompanied by a notification ofthe new tax amount and fine, if applicable, by registered mail against adelivery receipt.

❖ The taxpayer should settle the total of these amounts within two monthsfrom receiving the notification, plus a fine for delay. The fine shall becalculated as from the date of expiry of the deadline for submitting thedeclaration at the rate of2% for profit tax and 3% for payroll tax, for everymonth of delay, in which the fraction of a month is considered one fullmonth.

Practical Example (7)Najib is a pharmacist who submitted his declaration for the year 2002within the statutory deadline (before February 1st, 2003). He paid onemillion L.L. as profit tax and LL 200,000.00 as a payroll tax deductedfrom the salaries and wages of his employees. After verification of thedeclaration, the Tax Administration found that his profit tax amounts

to 2 million L.L. due to an accountancy error. Najib was notified of thedifference, through a supplementary imposition order, amounting to onemillion L.L. + a fine of 2% for each month of delay starting from the dateof expiry of the declaration deadline (February 1st, 2003) up to the date ofsettlement.


Practical Example (8)Jad is a sworn translator who submitted his profit tax declaration andpaid the tax, which he assessed at 2 million L.L.. But he failed todeclare the salaries and wages paid to his employees during the year.Following a verification process by the Income Tax Controller, theTax Administration notified him that he failed to declare the payroll

tax and charged him (through a supplementary imposition order) anamount of L.L. 200,000.00 plus the applicable fines, by registered mailagainst a delivery receipt.

❖ Verification fine: (10%) of the amount provided that it is not higher thanthe amount of the tax and not lower than LL 100,000.00.

❖ Collection fine: (3%) monthly of the total amount of the tax plus theverification fine starting from the date of expiry of the declarationdeadline (February 1st, 2003) and up to the date of settlement.


10. How can the taxpayer object to the additionaland supplementary tax impositions?

In case an error is detected in the Tax Administration’s decision, the taxpayer isentitled to object to an additional imposition, provided that the necessarydocuments supporting this error, or the real amount of taxable income is alsosubmitted.Note: The taxpayer’s objection to the additional amount imposed does not preventcollection of the tax, i.e. the taxpayer should settle the tax within the deadline.Once the objection becomes justified, the taxpayer is then be refunded.

How does the taxpayer submit an objection? Where? and when?The objection should take the form of a petition signed by the taxpayer or her/hislegal agent. The petition should include:

❖ The taxpayer’s name, surnames, address and place of residence.

❖ The type of imposition objected to (additional or supplementary) andits amount;

❖ The subject of the objection and its reasons;

❖ Documents supporting the facts listed in the petition should also beprovided. The objection should be submitted directly to theconcerned Financial Unit, against a receipt or the number and date ofthe objection registration at the Fiscal Unit’s office, or by registeredmail against a delivery receipt,within two months from the date ofnotificationto the taxpayer of the additional or supplementary tax.

Evaluation of the objection by the Administration

The concerned fiscal unit shall perform the necessary investigations and requestany necessary clarifications or additional documents.

❖ In case the objection is considered unacceptable in form (submittedafter the two-month deadline) or is basically unfounded, theconcerned fiscal unit will refer the case to the Objections Committeeaccompanied with its remarks. In this case the taxpayer does nothave to take any additional action, except to check with theObjections Committee concerning the progress of the petition.

❖ In case the objection is found to be fully justified, the concernedfiscal unit will satisfy all the taxpayer’s claims.

❖ In case the objection is found to be partially justified, the concernedfiscal unit will only satisfy the taxpayer’s rightful demands.

In all three cases, the concerned fiscal unit should notify the objector of theresults of the investigation within 15 days from taking its decision.


Can an objection be reconsidered?

❖ The objector, whose claims were partially satisfied by the concerned fiscalunit, shall have the right to request from the Tax Administration, in writing,within two monthsfrom receiving notification of its decision, to refer thecase to the Objections Committee for reconsideration.

❖ The Objections Committee shall notify the objector, or her/hisrepresentative, of the summons, communications and decisions, according toapplicable administrative procedures, against her/his signature, or byregistered mail against a delivery receipt.

❖ The objector who refuses to receive the notification shall be considered asproperly notified. The same provisions shall apply to her/his heirs in case ofdeath.

❖ The Committee’s decision shall be notified within 15 days from the date ofthe decision to:

- The Director of Revenues and the concerned fiscal unit according to administrative procedures.- The objector, either through regular administrative procedures or by registered mail a against delivery receipt.

Can the decision of the Objections Committee be appealed?

❖ The taxpayer and the Fiscal Department may appeal as well as the decisiontaken by the Objections Committee before the State Consultative Councilwithin 20 daysfrom the notification date, provided that the appeal petitionis submitted directly to the State Consultative Council.

❖ To accept the appeal, a depositamounting to 5% of the tax under objectionshould be effected.

❖ The deposit, together with other judicial fees, shall be paid to the treasury ofthe State Consultative Council within the specified deadline. Any appeal notaccompanied with the deposit receipt shall be rejected.

How is the Decision of the State Council Implemented?

❖ If the decision of the State Consultative Council is totally in favor of theobjector, the taxpayer may retrieve the full amount of the deposit.

❖ If the decision is totally in favor of the Treasury the deposit shall beconsidered as an acquired right of the Treasury.

❖ If the decision is partially in favor of the taxpayer, only a proportion of thedeposit, equivalent to the percentage reduction of the tax set in the decisionshall be refunded.


Helpful Tips

❖ Any person in Lebanon, whether physical or moral, should allow theemployees of the Ministry of Finance, when required and withoutclaiming professional confidentiality, access to all documents, recordsand information which may help in determining the basis of the tax to bepaid, either by the taxpayer herself/himself or by other taxpayers.Otherwise, the taxpayer shall be liable to a fine ranging from LL1,000,000.00 to LL 5,000,000.00.

❖ Taxpayers and their agents are not permitted to obtain statements orsummaries of tax declarations or documents which were previouslysubmitted to the Tax Administration.

❖ Taxpayers are not permitted to obtain statements or summaries of anothertaxpayer’s files.


11. Reminder of the Most Important Deadlines

Two months from Declaration of commencing work Forms M10 & M11 work commencement

Pre-payment Form S1

Before February 1 Annual declaration of Forms F1, F3, R5 and business activities salaries schedule

Declaration of cessation of practice Form M7

From 1 to 15 AprilFrom 1 to 15 July Settlement of payroll tax for eachFrom 11to 15 October quarter of the year Forms R10 and S1From 1 to 15 January

Before June 1 Personal declaration of employees Form R8who work at more than one job

Before end of September Settlement of lump sum tax

One month from the date Declaration of work cessation Form M6of work cessation

Before the end of the year Amendment of data/information Form M5


Annex (1): Various Cases of Self-Employed (Liberal) Taxpayers

Cases

1. Non-commencementof work fortaxpayers required tobe affiliated to asyndicate/order (incase the taxpayer hasnot commencedwork)

2. Amendment ofdata (due to acontingency or achange in activity).

3. Disposal of thework location (i.e.sale) or partialdisposal whilecontinuing to work.

4. Termination of work

5. Death of thetaxpayer

Form

M 7

M 5

M 6

F 1

S 1

M 6

F 1

F 3

S 1

F 1

F 3

S 1

Declaration Deadline

Before February 1st ofeach year

Before the end of thecurrent year

Two months from thedate of death

Taxpayers’ Duties

- Notification within thestatutory deadline, by fillingthe required form

- Supporting evidence for non-commencement of work

- It is sufficient to fill the formand submit the propersupporting documents (copyof the rent contract, propertydeed etc.)

- Notification within onemonth accompanied by theproper documents (name ofpurchaser, copy of thedisposal agreement)

- Declaration of improvementprofits, if applicable,together with the annual taxdeclaration

- Notification within onemonth from termination ofwork

- Personal declaration up to thedate of termination aftersettlement of taxes due

- Declaration of salaries andwages paid during the sameperiod

- Declaration of improvementprofits, if applicable (i.e. incase of sale)

- Notification - Personal income tax

declaration to be submitted bythe heirs and the declarationof salaries and wages paidfrom the beginning of theyear up to the date of death

Penalties for non-compliance with procedures

- Direct assessment if the taxpayer is unable toprove non-practice

- Fines for delay in submitting declarations andpayment (Verification and collection fines etc.)

- A fixed fine ranging from LL. 200,000.00 to LL. 500,000.00

- A fixed fine ranging from LL. 200,000.00 to LL. 500,000.00

- Fine for non-declaration

- Direct assessment of profits.- Statutory fines for delay in submitting the tax

declarations and its payment (fees for verificationand collection fines, etc.)

- Direct assessment- Statutory fines: Delays in submitting the tax

declaration and its payment (verification andcollection fines, etc.)


Remarks

- Both the buyer and the seller shall beliable for settlement of the taxes duefrom the seller for the current year,and for the previous years notdropped legally through the passageof time

- Taxes, duties and fines due from thetaxpayer shall be considered ascharges on her/his inheritance anddeducted from their total value uponcalculation of the transfer duties.Heirs shall remain liable forsettlement of taxes, duties and finesdue from the deceased


Annex (2) Main Contraventions and Fines Imposedon Taxpayers

Remarks

❖ The fractionof a month isconsidered afull month.

❖ The fractionof a month isconsidered afull month

❖ The fractionof a month isconsidered afull month

Important Remarks:❖ Direct assessment means discarding the taxpayer’s declaration, book entries

and supporting documents. The concerned fiscal unit shall then assess thetaxpayer’s net annual profit according to available data, standards andmethods, consistent with prevailing controls and procedures.

❖ The taxpayer shall be notified of the assessed profit, imposed tax, amountof the fine and the justifications for the assessment by registered mailagainst a receipt.

Case

1. Delay in submitting theannual declarationwithin the statutorydeadline.

2. Failure to submit thedeclaration, delay ofover 12 months orsubmitting an incorrectdeclaration.

3. Proper accountingrecords or supportingdocuments are notavailable.

Fine

Verification fine: 10% of thetax for every month of delayprovided that the fine is not lessthan LL.100,000.00 or higherthan the amount of the tax.Collection fine: 2% of the totalfine imposed for every month ofdelay in settlement.

Verification fine: 100% of thetax provided that it is not lessthan LL. 100,000.00 plus adirect assessment of thetaxpayer’s profits.Collection fine: 2% of the totalfine imposed for every month ofdelay in settlement.

Verification fine: 100% of thetax, provided that it is not lessthan LL. 100,000.00 plus adirect assessment of thetaxpayer’s profits.Collection fine: 2% of the totalfine imposed for every month ofdelay in settlement.